Revenue boost, returns filing on GST Council agenda - 20th July 2018

The Goods and Services Tax (GST) Council, in its next meeting, will take stock of the improving revenue performance of states, and also consider solutions for improving the rate of filing of returns, government officials said.

Additionally, the Council will also be apprised of the status of the IT system which hasn’t so far been free of complaints. According to sources in the finance ministry, the states’ GST revenue deficit, compared with the protected revenue, narrowed to 13% in the August 2017-June 2018 period, compared with 17% in the year-ago period. Till June, states like Maharashtra, Tamil Nadu, Andhra Pradesh and Telangana have GST revenue deficit of less than 5%.

Among large states, Punjab and Bihar have deficit of over 30%, compared with the protected revenue. However, the number of taxpayers filing summary returns (GSTR-3B) by the stipulated deadline continues hover around 60%, compared with the government’s own estimate of 80%, ideally. Worryingly, the filing of GSTR-1 —which contains details of outward supply — has declined over the past few months. “While there has been a 10 percentage point gap between the two returns, this has started to get wider lately. The Council may consider imposing a late fee on GSTR-1 filing, as currently there is no provision for the same,” an official said.

The Council will also consider the reports of the group of ministers (GoM) on IT issues. The committee, headed by the Bihar deputy chief minister, is believed to have recorded its concerns with Infosys’ performance. Infosys is the vendor for the GST Network. The Council will consider these reports along with proposals for improvement. Officials said many IT functionality, including advance ruling and appeal among others, are only partly ready. “The GoM has not found the progress satisfactory and asked Infosys to expedite development by deploying more resources,” an official privy with the GoM’s reports said. Additionally, taxpayers were still facing issues with GSTR-1 and TRAN-2 filing.

Infosys has assured the GoM to resolve these issues by the month-end after it was asked the reason for such glitches despite server utilisation being less than 30% at peak load. The Council will also take up a report on the reasons for accumulation of unsettled integrated GST, which has been a sticky problem as it doesn’t properly reflect the revenue position of states and the Centre. Till June, over Rs 1.16 lakh crore of IGST remains unsettled even after two ad hoc settlements this year. “One of the main reasons identified for this accumulation of unsettled IGST is the balance in IGST credit ledger. Since the most important trigger for settlement of IGST into CGST/SGST is cross utilisation of IGST credit for payment of CGST/SGST liability, build-up of balance in IGST credit ledger will prevent full settlement of IGST,” an official said.

The report on the issue has proposed amending the GST law to make it mandatory for taxpayers to first use IGST credit for payment of CGST/SGST before using the CGST/SGST credit. This will increase the cross-utilisation and help reduce the balance in IGST ledger, another official said. The proposal would be taken up by the Council for approval in its meeting on the 28th.